BEIJING has ordered a credit squeeze in a bid to slow economic growth and rein in inflation. The director of the newly created State Economic and Trade Commission, Mr Wang Zhongyu, said the credit restrictions would apply primarily to the manufacturing sector, which had witnessed excessive growth during the past year. ''If credit is intended for those processing industries where there is already a great deal of duplication, then of course that will be controlled,'' he said. However, he stressed that basic industries would be exempt from the clampdown. ''If the credit is for investment in basic industries, especially in transport and energy, then that credit will be guaranteed. ''The issuance of credit will depend on the use that credit is intended for,'' he said. Mr Wang also hinted that interest rates might be raised to help slow investment. ''Interest rates vary according to market conditions, they are not fixed,'' he said. But several enterprise managers have complained that the government is being heavy-handed in its approach to credit controls. ''One day we had a credit line, the next day we didn't. No explanation was given,'' said the manager of one Beijing manufacturing enterprise. ''There appears to be no connection to the credit-worthiness of enterprises, banks have simply been told to stop issuing loans,'' he said. Mr Wang, a close ally of Vice-Premier Zhu Rongji, said that investment in fixed assets had grown too quickly this year - by 70 per cent in the first quarter compared with the same period in 1992 - and the government's system of regulation and control needed to be improved. ''No country can give carte blanche to investment. Every country needs a quota for its fixed asset investment, and this is also true in China. So we shall try to exercise more effective control and regulation over fixed asset investment. ''Although the credit situation in China is tolerable, we shall try to exercise greater control so as to avoid a repetition of the sort of situation that occurred in the late 1980s [when urban inflation exceeded 30 per cent],'' Mr Wang said. Urban inflation for the first quarter of this year stood at 15.7 per cent, the highest since 1988, while economic growth continued to surge. Gross domestic product increased by 14.1 per cent in the quarter. Mr Wang admitted that serious economic problems had materialised but he said the economy was basically healthy and that any problems could be solved by deepening the reform process.